TABLE 13-7 An Investment Specialist Claims That If One Holds a Portfolio

question 208

Multiple Choice

TABLE 13-7
An investment specialist claims that if one holds a portfolio that moves in the opposite direction to the market index like the S&P 500,then it is possible to reduce the variability of the portfolio's return.In other words,one can create a portfolio with positive returns but less exposure to risk.
A sample of 26 years of S&P 500 index and a portfolio consisting of stocks of private prisons,which are believed to be negatively related to the S&P 500 index,is collected.A regression analysis was performed by regressing the returns of the prison stocks portfolio (Y) on the returns of S&P 500 index (X) to prove that the prison stocks portfolio is negatively related to the S&P 500 index at a 5% level of significance.The results are given in the following EXCEL output.
-Referring to Table 13-7,to test whether the prison stocks portfolio is negatively related to the S&P 500 index,the appropriate null and alternative hypotheses are,respectively,

• A)H₀ : ρ ≥ 0 vs.H₁ : ρ < 0.
• B)H₀ : ρ ≤ 0 vs.H₁ : ρ > 0.
• C)H₀ : r ≥ 0 vs.H₁ : r < 0.
• D)H₀ : r ≤ 0 vs.H₁ : r > 0.

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Definitions:

Team Tasks

Assignments or projects designated to be completed by a group working together.

Performance Potential

The capacity or ability of an individual or organization to achieve and maintain high levels of effectiveness and efficiency in their tasks or goals.

Complex

Composed of many interconnected parts or elements, denoting a system or problem that is difficult to understand, analyze, or solve.

Accepting Suggestions

The willingness to consider or adopt new ideas or recommendations from others.